Though Vietnam is among the fastest-growing economies in Asia, the possibility of it lagging behind other countries is huge, according to the Asian Development Bank (ADB).
Vietnam’s GDP growth rate is projected to be 6.5% in 2017 and 6.7% in 2018, says a report published by ADB in Hanoi on April 10.
“With growth forecast at 6.5% in 2017, Vietnam is in the list of buoyant economies in Asia” said Eric Sidgwick – Director of Vietnam-based ADB at the launch of the Asian Development Outlook (ADO 2017). “The economic outlook is bright.”
According to ADB, Foreign Direct Investment (FDI) is one of the key growth drivers. ADB predicted that FDI disbursements will be about US$15 billion and capital pledged for disbursement will on the rise despite the TPP failure.
Besides, Vietnam has become a manufacturing hub of the region. Its exports have outperformed many ASEAN countries with annual growth of up to 8.3% in recent years.
The proportion of Vietnamese exports in ASEAN expanded from 7% in 2009 to 14% in 2015. In particular, the share of high-tech goods jumped from 2% to 12% of the region’s total exports.
Another factor, said Sidgwick, is the rapidly growing middle class, which also helps fuel economic growth.
It is expected that the group with average income of more than US$8,500 a year will double between 2014 and 2030, numbering 33 million. As a result, wholesale and retail sales have increased by an average of nearly 9% over the past five years.
However, Vietnam’s growth remains “below standard level” to become a high-income country by 2030, said Aaron Batten - ADB’s chief economist in Hanoi.
“Vietnam still faces the risk of lagging behind as GDP growth remains below 7% a year,” Batten said. He added that if growth rate was two percentage higher, Vietnam would be able to be considered high-income economy by 2026.
ADB commented that agricultural growth has remained 2.4% per year since 2011, which is a low rate. “If annual agricultural growth stands at 5%, Vietnam’s economic growth could amount to 7%,” he added.
In addition, Vietnam’s labor productivity is much lower than that of other ASEAN countries: one-third of Indonesia’s, and half of the Philippines’ or Thailand’s.
Meanwhile, Sidgwick explained: “Development of agricultural sector will not only help promote the economy, but also bring greater benefits to farmers. Their benefit rate is not as high as it ought to be.”
Sidgwick added that Vietnam’s economic growth had been good from the mid-1990s to the mid-2000s, with per capita income soaring and many good performance. Vietnam developed better in that period.
“ADB’s ADO outlines a number of factors that need to be addressed. Now, everyone understands (the challenges to growth). However, the Government is having a hard time figuring out what to do. That’s the difficulty for Vietnam,” he said.
-Translated by VietnamCredit-